Table of Contents
Table of Contents
What Is Strategic HR?
The HR department is playing a bigger and more important role in the success of companies coming of age at the start of this decade. Company executives are calling on HR leaders to be more strategic, and the human resources department is answering the call. HR strategy is a critical component of the larger business strategy, and in many cases, it will have a direct impact on the outcome of the business.
Strategic HR is when Human Resources professionals use future-oriented thinking to plan and formulate solutions to business problems within the company. It is going above and beyond the administrative work HR is known for and becoming a critical thinker who solves complex issues. Strategic HR may involve working on company direction at the highest levels and determining effective tactical decision-making. All strategic planning should be focused on the company’s business plan.
The human resources strategy will direct the business on many of the following ideas:
- Who to hire
- When to hire
- How many people to hire
- How to train employees
- How to cultivate company culture
- How to increase employee engagement
- How to decrease employee turnover
- How to manage underperforming employees
- Promotion and compensation plans
- Organization structure
- Vacation and sick policies
- Employee conduct and behavior
- Termination policies
As you can see, that’s not a small list! Many of these activities are vital to the company’s well-being and may be the difference between success and failure.
There are different paths for strategic HR, such as strategic talent management, staffing, compensation, DEI, and many more.
Why Is Strategic HR Important?
You may be wondering if it’s worth it to put in extra effort to be a strategic HR professional. Here are a few reasons why it can be so beneficial to a company (and your career).
- Problems should be solved at the root. HR frequently puts out figurative fires that arise within companies. If processes in the company stay the same, it’s likely that these problems will arise again and again. Solving the root issue prevents future problems, saving time and money.
- It can save the company time and money. When HR professionals use strategic thinking, it improves processes and decreases costs, contributing to a company’s success.
- It reinforces the value of HR. The ability of HR professionals to solve complex issues will increase the department’s credibility and give you a seat at the decision-making table.
Strategic HR and Data
The foundation of strategic HR lies with data analytics. As professionals attempt to solve complex issues that arise, their solutions should be grounded in data-driven practices. HR professionals may be involved in the data collection, cleaning, interpretation, and predictive analysis required to make informed decisions. Predictive analytics is especially useful with strategic HR because it uses past data to predict the future.
“I have seen a lot of data visualization and analytic roles surface and report directly not to IT but to the HR function. The power of on-demand reporting and forecasting capabilities has allowed businesses to make better and faster decisions. It’s about the data!” — Anthony Howard, LDSS, SPHR, SHRM-SCP
To some, the thought of data analytics can seem intimidating. Don’t worry; you aren’t expected to run Master’s-level statistical equations. Much of the useful information can be derived using averages, comparisons, percentages, trends, and correlations. You’ll be surprised at how well simple graphics can do the trick.
Microsoft Excel is a great platform to use for data analytic starters. Almost all of its functions can be learned through a standard internet search.
Tips for Creating a Strategic HR Plan
Just having big ideas isn’t the same thing as having a strategy. As you begin to create a strategic HR plan, here are a few tips to keep in mind.
Tip 1: Determine Your Organizational Needs
Based on your company’s goals and objectives, what will need to change? Will you need to hire more people? Will you need your current employees to produce more? Will you need certain employees to learn new skills or earn specific certifications or licenses?
Tip 2: Look to the Past
A great place to start when planning for the future is to look back to the past. Did your company achieve its goals last year? If not, what held them back? Sometimes it’s easier to connect the dots in the past than it is to forecast the future. If you understand where your company has been weak or fallen short in the past, then you can make adjustments to strengthen those positions.
Tip 3: Aim for Goals With Measurable Results
Your HR strategy should result in specific behavior that can be measured and tracked. If your strategy is too general or too ambiguous, it’ll be hard for anyone in the business to tell if you succeeded. Just as a business creates goals and objectives, your HR department should have clear, written, time-sensitive goals that point to your desired outcomes. Hold yourself and your team accountable to these goals as your work towards them. Use metrics to measure the effectiveness of your HR strategy.
Tip 4: Use a Guide to Get Started
This Strategic Planning Guide from Gartner is a great resource to kick off your strategic HR journey. It’s free to download, and it includes in-depth instructions (and an interactive template) for crafting a plan that will help strengthen your company in the long term.
Different Types of Strategic HR
Let’s explore three types of strategic HR in a little more detail.
Strategic recruiting involves predicting and planning for vacancies that have not yet happened. By creating a plan of attack before the problem strikes, the business will be much quicker to fill open positions.
Example: You analyze turnover data from the last five years and find that large numbers of college-aged employees leave during the months of August and September to return to school. You create the job postings and organize recruitment activities on college campuses three months prior, in May, so you are prepared ahead of time to fill predicted vacancies.
Strategic Talent Management
Successful companies have well-oiled leadership pipelines and retention plans founded on strategic principles. As talent is either utilized or wasted, it’s important to create an atmosphere that promotes growth opportunities for employees. A good formula for achieving maximum results out of employees is the AMO framework:
f (results) = Ability x Motivation x Opportunity.
Each employee needs all three factors to succeed. Strategic talent management creates a system where employees grow and leadership vacancies are easily filled. This can involve skill-profiling employees, creating individualized growth plans, and assessing the overall leadership needs of the company.
Example: Analysis of company demographics reveals that 25% of senior leaders will reach retirement age within the next five years. This leads you to predict that there will be 12 senior-level positions to be filled in this time frame. You immediately begin creating succession plans and executive coaching assignments for individuals who show promise to fill those senior leadership positions. Preparing for vacancies years in advance helps make the transition of individuals smoother and quicker.
Strategic compensation involves aligning compensation structures with the company’s goals and rewarding employees for the behaviors the company needs. For example, if the company is in need of creativity, its compensation structure should reward creativity. Strategic comp also actively seeks what their unique employee group finds to be valuable. Not every employee demographic wants the same thing.
Example: The demographics of the company show that the average age of employees in the organization is between 18 and 24. You send out a survey to employees to find out what they value most. The results show high value in tuition-reimbursement programs and little interest in long-term benefits. You tailor your rewards system to match the employee voice in order to increase retention.
Qualities of a Good HR Strategy
No two HR strategies will be the same. Because every company has different needs and different objectives, the HR strategy for each company will vary. However, there are some fundamental principles that you can follow when developing and implementing your plan. In general, you probably have a solid HR strategy if…
- Your HR strategy is aligned with your company strategy. This is definitely the most important aspect of a good HR strategy. If you don’t know what your company strategy is or aren’t aware of the specific goals and objectives of the business, then start there. Understand what the business is trying to achieve, then find a way for HR to positively impact that outcome.
- Company leaders and executives are aware of your strategy and are bought-in. If you never share your strategy with anyone, how will you know if you’re on the right track? Make sure you’re actively sharing, discussing, debating, and re-thinking the HR strategy with the rest of the leadership team. Get them bought-in to what you’re trying to achieve and help them see how your plans will make a positive impact on the company’s goals.
- You have a clear way to measure your outcomes. You probably don’t have a great HR strategy if you don’t explicitly know how to measure your success. Tie your goals to key performance indicators that you can monitor and quantify.
- You have short and long-term objectives. In general, a good HR strategy will not be able to be implemented overnight. It’ll take time, effort, and patience on your part as the company slowly but surely makes the progress you hope to see. While your overall vision should be focused on long-term success, make sure you also have short-term goals and milestones that you can hit along the way.
Real-World Example of Good HR Strategy
A now-famous example of great HR strategy has been executed by Netflix. About a decade ago, Netflix released its “Culture Document” to the world. The document, which is around 125 slides long, outlined the people strategy that Netflix lived by. Here are some of the highlights:
- “Actual company values are the behaviors and skills that are valued in fellow employees.” Netflix says that many companies post their company values on the wall, but do not use those values to make decisions when it comes to hiring, promoting, and compensating employees. Instead of following the crowd and not actually living their core values, Netflix decided that the people who are hired and promoted would demonstrate nine key behaviors or skills.
- “A great workplace is not espresso, lush benefits, sushi lunches, grand parties, or nice offices. A great workplace is stunning colleagues.” As part of their HR strategy, Netflix emphasizes the importance of working with high performing people. They make a genuine effort to hire the best and openly say that “adequate performance” will not cut it.
- “We’re a team, not a family.” Some companies like to promote their “family” atmosphere, but Netflix rejects this idea entirely. Netflix goes on to say that not only are the employees part of a team, but they’re part of a “pro sports team” and not some child’s recreation team.
- “Hard work is not relevant.” Netflix states clearly that they’re not concerned about how many hours of work you put in the office or how hard you’re working compared to your peers. What they do care about is accomplishing great work. “A-level” effort with “B-level” results is not enough to keep your job.
- “Responsible people thrive on freedom and are worthy of freedom.” Netflix doesn’t want to create a bunch of rules and complex processes to govern its company as it grows. So, as part of its HR strategy, they have committed to allowing responsible people the freedom over their choices. They believe that by granting this freedom, high performing employees will stay around longer and will be happier.
- “You don’t need policies for everything.” To continue with this idea of freedom and responsibility, Netflix has decided not to track employee hours or employee vacation time. Employees are expected to take the time they need when they need it and to take an appropriate amount of time. Netflix also doesn’t have a dress code policy. They make the point that “there is no clothing policy at Netflix, but no one comes to work naked.”
- “Pay top of market is core to a high-performance culture.” Netflix is somewhat obsessed with high performing employees, but they know they can only ask for this because they pay the highest salaries. One question Netflix has managers ask themselves is, “what would you pay this employee if they were threatening to leave unless they got a salary bump?” The answer to that question is exactly what the employee should be paid now.
Now, the Netflix culture document is over a decade old, and undoubtedly, many of their policies and strategies have changed over time. That’s perfectly normal and expected behavior. Policies and strategies should change over time, especially as your company grows into different phases of its lifecycle. But the takeaway here is that Netflix established a strong HR strategy and then published it to the world. They wanted everyone who worked at Netflix and even people who were considering to work at Netflix, to know what they were all about.
Of course, when you develop your HR strategy, you don’t need to feel pressure to share it externally. But it should be shared internally so that your employees and leadership team knows what to expect from the HR department.
Build Your HR Strategy One Step at a Time
If you remember nothing else, remember this: HR strategy is a plan to help the people in your organization accomplish the goals and objectives of the business. That plan can and will encompass a lot of different things. It will include ideas about hiring and firing, onboarding and training, promotions and raises, policies and behaviors, and more.
If that’s overwhelming, then just start with one thing and move on from there. Your plan doesn’t need to be complete today, tomorrow, or even this month. Start by focusing on one thing in one area of the business that needs particular attention. Once you’ve got that taken care of, move on to something else. Over time your plan will come together and you’ll have a cohesive, exhaustive HR strategy for your company.
Questions You’ve Asked Us About Strategic HR
Chase carries HR experience in training, recruiting, labor and employee relations, team leadership, and as a generalist. He is always building and expanding on his skills as well as looking for ways to augment his network. When he can, he looks for ways to give back by mentoring new/upcoming HR professionals.